State of the Consumer: Assessing Credit Health and Spending Capacity as Inflation Persists

Consumer credit health remains constructive overall, though persistent inflation is reducing spending flexibility and creating greater pressure among lower-income and lower-credit consumers. Low unemployment (4.2% in September, below its 5.7% long-term average since 1991), modest household leverage (household debt at 57.8% of nominal GDP) and below-average debt servicing requirements (11.1% of disposable income) support household balance sheets, with aggregate card, personal loan and auto delinquencies broadly stable or improving y/y. Credit performance is uneven beneath the surface, as subprime and near-prime card and personal loan delinquencies have increased (subprime card delinquency rising to 20.74% from 19.79%). Credit availability remains broad, with card and personal loan originations growing across credit tiers, though subprime auto originations remain weak on elevated vehicle prices and financing costs. Spending trends are resilient but selective: retail sales growth accelera